I can take the chip out and program blink it on one of my jeenodes and then put it back into this breadboard and the led will blink as wanted.

I'm using the same USB BUB to program the jeenode (with the jumper set to 3.3v) with no issues at all.

I'm using: arduino-0021atmega328 (new and old chips don't program but work fine)

I've tried to play with the reset button before after during/etc the sketch size and no luck. I moved putting a cap between reset and DTR which seems to work as the LED blinks 3 times when the sketch size comes up on the console (my guess).

Programming other Arduinos via USB and/or using this USB->Serial works fine so I'm thinking its not my PC/USB/setup